The determinants of organizational innovativeness: The adoption of GASB 34 in Pennsylvania local government

In 1999, the Government Accounting Standards Board passed GASB Statement No. 34 (GASB 34), requiring local governments to improve the way they prepare financial information. GASB 34 requires many local governments to adopt the modified accrual basis of accounting and to record their infrastructure assets on a retroactive basis. GASB 34 is perhaps the most important change in government accounting history, yet we know little about whether it will be adopted. GASB 34 is designed to improve the transparency and accountability of governments, but some opponents claim that GASB 34 is costly and difficult to implement. Adoption is mandatory, but the consequences for failing to adopt are minimal, since there is little regulatory oversight over the financial reporting of local governments. Given these conditions, the extent to which local governments will adopt an administrative innovation such as GASB 34 is unknown.; This study uses Everett Rogers' model of organizational innovativeness to identify the organizational determinants associated with the adoption of GASB 34 among Pennsylvania's local government. The model contains three organizational components: organizational culture, organizational structure, and the external environment. Proxies of organizational culture are the local government's propensity to innovate and responsiveness to constituents. Proxies of organizational structure are the local government's occupational specialization, functional differentiation, administrative intensity, slack resources, and organizational size. Proxies of the external environment are the local government's debt financing and intergovernmental revenue.; The research question is: Can a model of organizational innovativeness identify the determinants of adoption of GASB 34 among Pennsylvania local governments?; The binary logistic regression indicates that organizational size is a strong and consistent determinant of adoption, supporting the hypothesis that larger Pennsylvania local governments are more likely to adopt administrative innovations such as GASB 34 than smaller local governments. The propensity to innovate and responsiveness to constituents are also included in the model, but the predictive ability of these variables is weaker than organizational size. Overall, the results suggest that organizational determinants such as organizational culture and organizational structure can be reliable determinants of the adoption of administrative innovations such as GASB 34.